Where evidence meets policy

Increasing university participation: does it help the economy?

Almost half of all young people in the UK now go to university – but does increasing participation improve productivity? A new study suggests it does.

Graduation day: picture credit Hilary Gaunt

What happens to graduates in the years after they leave university? Using data from the British Household Panel Survey (BHPS) and from the World Bank, a paper in the International Journal of Economics shows that while many start in low-paid jobs, they progress faster than others.

Higher levels of university education are a spur to economic growth, the paper concludes.

Using World Bank data on the proportions of populations which have a post-school qualification, the study by Dr John Simister of Manchester Metropolitan University shows that productivity is higher in those countries where more people are university or college graduates.

The paper also shows that the numbers of patents are higher in those countries where there are more graduates – suggesting that better-educated countries are well placed to keep ahead of technological changes.

One key question is whether graduates’ higher levels of productivity are cause or effect – are people more productive because they are graduates, or do they make it to university because they work harder?

Countries with high productivity tend to be the wealthiest countries – where more people can afford to go to university. But the paper examines this issue, concluding that a one per cent increase in the proportion of graduates will lead to a seven per cent increase in productivity three years later.

The paper shows that while graduates often start work in low-paid, unskilled jobs, they tend to gain higher bonuses than non-graduates. This suggests they are more productive.

In a time of austerity, it concludes, colleges and universities are vital for the future of prosperity.

The data did not show, though, which subjects raised productivity the most.